The Board of Directors of the Pennsylvania Employee Retirement Plan has approved an additional investment of $100 million in Ardian Secondaries Fund IX LP. The fund is a large fund of funds consisting of private equity allocations and infrastructure funds. In addition to $100 million, the pension will allocate up to $50 million to sidecar vehicles and co-invest with the Ardian Secondaries Fund IX.
The Board also approved an additional $75 million investment in Oak Street Real Estate Capital Fund VI LP, a single-tenant net-lease real estate fund. The Board also decided to investigate active management of US fixed income portfolios. The $38 billion fund, which invests more than $2 billion in net assets in U.S. core bonds, is reviewing investment managers for this policy update.
The fund’s investment staff also provided a proposed schedule for future consultant searches. The staff will begin requesting information processes for selecting the next real estate consultant in mid-March 2023 and general investment consultants in mid-May 2023. His current contract with NEPC, LLC for real estate consulting services expires on his December 1st. , 2023, and the current agreement with Callan, LLC for general investment consulting services expires on February 26, 2024.
Outside of investment-related affairs, the Board approved the investment fund’s 2023-24 budget, the defined contribution plan, the administrative budget, and the deferred state compensation budget for federal employees.
The Board also approved a stress test and risk assessment report prepared by system actuary Korn Ferry. Stress testing considers many scenarios and the worst case of such situations. We found that the 2022 report puts the plan in a better position compared to the 2021 report. The 2022 report concludes that the Pennsylvania SERS will be able to pay its profits in the event of a recession or a prolonged market downturn scenario. Additionally, the 2022 report predicts that he will have a lower employer contribution rate and a higher funding rate in 2022 than his 2021 valuation.
Consultant Karan provided an update on the current economic climate and capital markets.
The presentation discussed that GDP fell for the second consecutive quarter—1st and 2nd time this year—According to Curran presenters, this does not constitute a recession. The presentation highlighted a citation from the National Bureau of Economic Research, which defines a recession as “a significant decline in economic activity spread across the economy lasting more than a few months.”
Curran ended his presentation with a broad overview defining environmental, social and governance investments. According to Callan’s research, more than 200 private equity funds have been established from 2019 to 2021 to address Impact and his ESG investments. Of all Impact and his ESG investments, 10% to 15% are in the real estate sector. According to the company, real estate investing makes an impact by creating affordable housing and addresses sustainability through an approach where buildings reduce energy and water use, as well as greenhouse gas emissions.
Following the presentation, board members discussed whether the board and pensions themselves should focus on creating social impact through their investments. One member noted that this could be detrimental to state employees as the plan’s primary fiduciary responsibility is to provide the best possible return. is under discussion that the social ‘impacts’ resulting from the investment may be ‘impacts’ that contribute to communities or projects located outside the state or that are of interest to planning participants. clarified in
Tags: curran, co-investment, ESG, infrastructure, Penn SERS, Pennsylvania State Employee Retirement System Board, private equity
